Sunday, August 31, 2008

Parking Mad - Investment or traffic stopper?

It's a hot sunny day and whilst browsing around for some inspiration, what should pop up? a report from PropertyWire about the idea that car parks and marinas are a good idea for investment!

OK, I can understand the asset point of view, the old adage of you "you cant make more land" and all that, but what is the reality, and is there any sense?

Well the report does specifically talk of Australia and says "We have had a higher than normal number of inquiries about car parks and marinas,' said Geoff Blaze of Melbourne based property company Blaze and Jenkins."

"As far as car parks go, it is the land that is of interest. Investors are interested because they can see future possibilities with the land and they want to explore the chances of developing these sites in the future,' he added."

This is all well and good, buy a lump of land, turn it into a car park, hope that one day someone wants to build on it, then hope you can get planning permission, and finally, all involved are bazillionaires at the end!

Nice thought! BUT, notice the number of "hopes" for a start, the article does go on to say

"There seems little doubt that car parks can be a lucrative investment. But university lecturer and property book author Peter Koulizos said because the car park market was so small compared with the broader real estate market; it was difficult to get reliable figures for growth. On the positive side, car parks are pretty maintenance-free,"

So do these car parks magically run themselves? hardly! The fact that no real figures seem to exist on the subject as far as growth, gain, CGT and so on does somewhat make you wonder how exactly the proposition is worthwhile. Granted there is money in the car park industry, no question about that in the major cities and tourist destinations, but to begin publishing willy-nilly to the public that this is a good idea?

Aside from the lack of figures, the unknown as to whether you might be able to develop later and so on, one major thing that is not mentioned is the restriction of foreigners buying property in Australia in the first place. There are numerous regulations and restrictions preventing Johnny foreigner from buying in Australia, right down to the fact that unless you are Australian, you can only buy off plan property, and only a certain percentage of a development can be owned by foreigners. There is no immediate sign of change to this ruling at the moment.

So, car park indeed, if you can buy a few spaces in a tourist destination and rent them to the locals year round, great idea! You will be liable for tax on your rental gains. There is some discussion on the forum, but admittedly no definitive answers. The other thing to consider is maintenance. I am sure like I, most will think "How much maintenance can a car park need?" According to Teignbridge Council in the UK, about £1.5 million should do the trick! Obviously they are responsible for a number of car parks, but it does still illustrate that no investment is ever really what it seems.

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